According to Aon Global Risk Insight Platform, Aon's internalglobal repository of risk and insurance placement information,annual premiums for cyberspecific coverage in 2013 totaled about $1billion, compared to $675 million in 2012.

This is based on Aon Global Risk Insight Platform data asextrapolated for the entire industry– Aon's share of cyberinsurance extrapolated to $1 billion based on Aon's overall shareof all insurance placements, according to Kevin Kalinich, theglobal practice leader for cyber/network risk at Aon RiskSolutions.

Kalinich said that more than 50 insurers sell the coverage,including Zurich Insurance, American International Group Inc.,Chubb Corp. and Lloyd's syndicates.

Cyber policies cost between $5,000 to $35,000 a year per $1million of coverage, according to Kalinich.

The research was prompted by an insightful hearing last week oncyber security convened by Sen. John D. “Jay”Rockefeller, D-W. Va., chairman of Senate Committee onCommerce, Science & Transportation where it was disclosed astructure is emerging that commerce and industry will use todeal with, and to the extent possible, limit or perhapsthwart, cyber attacks, and that the insurance industry is a keycomponent of that emerging structure.

Peter Beshar, executive vice president and general counsel atMarsh & McLennan, testified at the hearing that interest incyber insurance is expanding rapidly. He said the number of Marshclients purchasing stand-alone cyber insurance increased more than20 percent in just the past year.

The Insurance Information Institute has developed a white paperon the issue because of the growing threat of cyber attacks. RobertHartwig, I.I.I. president, said there is a growing pool ofcustomers, as small businesses “are transacting more of theirbusiness online [and] have many of the same exposures as a companylike Target, just on a smaller scale.”

Kalinich added, “The reality is that the high profile, largecompany breaches have received most of the publicity, but there area lot of small and medium size companies (85%) that do not purchasecyber insurance—yet.”

At the hearing, Rockefeller voiced deep frustration about theinability of Congress to pass meaningful legislation aimed atramping up protecting personal information from cyber attacks.

Apparently, Congress has been trying to broaden consumerprotection from data breaches through legislation since at least2012. Two bills dealing with the issue are pending in the Senate,and a House subcommittee passed similar legislation in January.

The opposition to cyber protection legislation is being led bythousands of websites, including Craigslist and Reddit. They arguethat the legislative proposals fail to protect the privacy ofInternet users.

In 2012, legislation known as the Cyber Intelligence Sharing andProtection Act, or CISPA, failed in the Senate due to similaropposition. The opponents argued that it would erode privacy on theweb by encouraging the growth of a public-private partnershipbetween internet companies and the federal government.

Climate change's impact on flood insurance

Needless to say, flood insurance remains on the radar screen,especially with the early Monday morning release of a UnitedNations report which said that climate change is occurringrapidly.

The IPCC warned that the effects of climate change will worsenand said spending and planning are essential to contain futurecosts. They compared the spending to property or health insurance,according to the Insurance Information Institute.

On the insurance front, Sen. Mary L. Landrieu, D-La., said todaythat she had urged the National Research Council (NRC) to focus onaffordability and sustainability in its analysis of the NationalFlood Insurance Program (NFIP). The statement was released as theNRC held its second public meeting today for Phase 1 of theAnalysis of Costs and Benefits of Reforms to the National FloodInsurance Program authorized by Biggert-Waters Flood InsuranceReform Act of 2012.

In her letter, Landrieu said affordability is critical to createa viable, self-sustaining NFIP and encouraged committee members toensure responsible homeowners and businesses can access the floodinsurance they need and deserve.

“Over 55% of our nation's Gross Domestic Product is produced bythe 15% of U.S. counties that are located directly on open ocean,the Great Lakes or in coastal floodplains. The NFIP was createdwith the explicit goal of making flood insurance available onreasonable terms and conditions so that people could live wherethey needed to work to power our nation's economy,” she said.

Workers' comp fraud report shows depth ofproblem

Reports of major fraud in the New York State workers'compensation system should give the entire industry pause, and is asignal that insurers should expect pressure from employers andpublic officials for better audits of employers' job-classificationpractices.

A report from the New York County Grand Jury last week cited aJune 2013 Fiscal Policy Institute report, which estimated that NewYork State and New York City lost over $420 million in 2011 solelyfrom the way 70,000 construction laborers were being paidoff-the-books or misclassified as independent contractors. That isa big number because the entire state workers' compensation systemhas revenues of $6 billion annually.

The biggest single component of that loss was unpaid workers'compensation premium, which was well over $230 million, the reportsaid. Another $100 million represented health-care costs borne bythe taxpayer or financed by surcharges on employer-paid healthinsurance.

“Moreover, workers' compensation fraud is not limited to NewYork County, nor is it limited to the construction industry,” saidDavid Dickson, of Fairport, N.Y., a public member of the New YorkCompensation Insurance Rating Board and active past president ofthe Professional Insurance Agents of New York.

He said workers' compensation fraud extends beyond the Hudson,East and Harlem Rivers, and represents a major impact on theeconomy. “Employers who 'play by the rules' should be outraged, andshould demand to know who is responsible for fraud,” Dickson said.He said the New York County Grand Jury, and the New York CountyDistrict Attorney, “have done a great service in reporting theirfindings.”

Cyrus Vance, New York County District Attorney, called forchanges in state law increase penalties for misclassification inorder to ensure that sentences are proportionate to the magnitudeof the fraud. He called for increased transparency by reforming theapplication and audit process, thereby making it more effective andless susceptible to fraud; and increased dissemination ofinformation into the hands of those charged with investigating andprosecuting fraud; and increased education for employees and thecommunity at large about the workers' compensation system and itsvalue to the public, so that everyone is better able to protect thesystem from fraud.

In a sign of what insurers in the state should expect, Vancesaid he believes the criminal fines currently available formisclassification fraud do not constitute a sufficient financialpenalty or an effective deterrent. In fact, Vance said, thepotential criminal fine could in many cases be far smaller than theamount of unpaid insurance resulting from the fraud.

“The law should be amended to increase the criminal fines as ageneral matter and to give judges the option of imposing a finethat is double or triple the amount of the fraud,” Vance said.

The New York Insurance Association said in a statement, “Fraudis rampant in the state's workers compensation system and needs tobe addressed.”

NYIA officials said they are currently reviewing the districtattorney's report, “but our initial impression is that the proposedrecommendations could have merit.”

At the same time, in an industry conference in Las Vegas, RobertHartwig, president/CEO of the Insurance Information Institute andits chief economist, provided a detailed report indicating that thescars from the recession that started in 2008 remain, but there areopportunities for workers' comp providers to grow despite thestill-sluggish economy.

His report found that the deep recession created “winners andlosers” in the economic recovery, reshaping the American laborforce and the exposure base for workers' compensation. He saidgrowth areas include the energy sector. He also warned that thePatient Protection and Affordable Care Act is “rapidly changing”the U.S. health-care landscape and that the workers' compensationsector has “inextricable linkage” to that change.